Study: Home Equity a Major Factor in Senior Housing Affordability Crisis

By 2029, over half of the United States’ projected 14.4 million middle-income seniors (aged 75 and older) will not have sufficient financial resources to pay for specialized housing and health care needs. This is according to a study released by Health Affairs, and authored by researchers at the University of Chicago, the University of Maryland School of Medicine, the National Investment Center for Seniors Housing and Care and Harvard Medical School.

The report, titled “The Forgotten Middle: Many Middle-Income Seniors Will Have Insufficient Resources For Housing and Health Care,” finds that the current makeup of senior housing and health care providers “are often out of the financial reach of many of this country’s eight million middle-income seniors (those ages seventy-five and older),” and that the private seniors housing and medical services industry focuses primarily on higher-income people.

The researchers’ findings also determined that the ability to tap home equity in funding these services and to age in place makes a sizable difference in the ability of seniors to afford more of these services, but still leaves over half of the affected segment behind in terms of their ability to afford the services they will need as they advance in age.

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Middle-income seniors’ needs, aging in place

By 2029, the report estimates that there will be 14.4 million middle-income seniors. Sixty percent of those seniors are expected to have limitations on their mobility, while 20 percent of the segment are projected to require “high health care and functional needs,” the report’s abstract says.

“These folks in the middle really don’t have a lot of options available to them,” says Caroline Pearson, an author on the study and senior vice president of the National Opinion Research Center (NORC) at the University of Chicago.

“Most of them can’t afford to move into an assisted living facility, they may not have the money to pay for extensive in-home care, and so they get forgotten,” she says. “As the baby boomers are going to be aging, we anticipated that this forgotten group might really grow, so we wanted to really understand how the size of the senior population is going to change over the next ten years, what that means for their demographics, their health status, and consequently their housing needs.”

In terms of aging in place, Pearson echoes the findings of the report saying that while staying at home is often the preference of seniors either by choice or by financial necessity, that doesn’t diminish the fact that specialized health and housing services to are still going to be needed by the seniors that may not have the means to afford them.

“Some seniors really prefer to stay at home and continue to be part of the communities in which they’ve always lived, and some seniors simply don’t have the financial resources available to make other choices,” she says. “But, I think the issue is that even as people may want to age in place as they begin to have mobility challenges or cognitive declines, living independently becomes harder. So, those folks need some form of support, whether it be from a family caregiver or from a professional.”

The difference home equity makes

According to the study’s findings, the ability for a senior to tap into his or her home equity helps provide a substantial increase to the possibility of affording these specialized services. Still, while access to housing wealth can be a difference-maker for many, it does not go far enough to solve the problem presented by a lack of affordability these increasingly necessary services have.

“We looked at $60,000 as a threshold,” Pearson says. “People with less than $60,000 a year would likely not be able to afford assisted living as it exists today. By looking at that comparison without housing equity, 81 percent of middle-income seniors have insufficient resources to afford assisted living. If you include housing equity, that drops to 54 percent.”

Because the issue of tapping home equity is a controversial one for some, the study’s results that are both affected and unaffected by the tapping of home equity are presented side-by-side to allow readers to make more of their own determinations concerning whether or not they would entertain the notion of selling their home or unlocking its equity. Still, while the difference home equity can make is substantial, in most cases it is not projected to make enough of a difference to eliminate the problem of service affordability for middle-income seniors.

“The housing equity is a lot of peoples’ savings, and it does have a big impact on the numbers, but it doesn’t make the problem go away,” Pearson says. “We still have a majority of seniors with less than $60,000 in annual resources [even when utilizing home equity].”

Raising the issue

While the study stops short of making explicit policy proposals to curtail these issues of affordability, the primary intent of conducting this research in the first place was to make both the public and lawmakers more aware of how pressing this issue will become as time passes.

“We really tried to raise the importance of this issue and highlight the fact that there are insufficient policy proposals out there right now,” Pearson says. “We did talk about a range of options, which might include trying to bring lower cost assisted living or other senior communities to the market so there would be more affordable options available for middle-income seniors.”

One of these options, Pearson says, is to create an “a-la-carte” approach to in-home assistance, piecing together a package of personal and medical care services or home modification that people can draw on an as-needed basis.

It’s ultimately up to the public and the government to determine and implement long-term, viable solutions to the issues presented in the report, she says.

“I think there are big public policy questions about what the government’s role is in helping to fund long-term care, and whether the government does inevitably fund long-term care as people simply spend through their resources.”

Find more information about the study in an NORC press release.

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